Rare Earth Magnet Security Act of 2025

The Rare Earth Magnet Security Act of 2025 would create a new federal tax credit to encourage domestic production of high-performance rare earth magnets (permanent magnets used in many advanced technologies). The credit is claimed as part of the general business credit and would apply to magnets manufactured in the United States and sold to unrelated buyers (with an option to treat related sales as unrelated under IRS rules to prevent abuse). Two main credit amounts are provided: $20 per kilogram of magnets produced in the U.S., and $30 per kilogram if at least 90% by weight of the magnets’ component rare earth materials are produced in the United States. The credit phases out starting in 2035 and ends after 2037. The bill also imposes strict sourcing rules for magnet components, with exceptions for certain critical materials and wartime scenarios, and includes a coercivity-based exception for eligible manufacturers that work with federal DoE/DoD programs. An optional provision allows taxpayers to treat the credit as a prepayment of tax. The amendments would apply to tax years beginning after December 31, 2024. In short, the bill aims to spur domestic production of high-performance magnets, bolster national security by reducing foreign dependence, and shape the supply chain by tying eligibility to where magnet materials come from and how the magnets are produced.